Yesterday, the stock market saw mostly flat to slightly up movement, with a big boost in the last 10 minutes due to a closing imbalance. Despite this, it was a relatively quiet day overall.
The release of the Consumer Price Index (CPI) report yesterday revealed lower inflation than anticipated, aligning closely with what the CPI swaps had predicted. The swaps had forecasted a 0.16% increase, and the actual number rounded to 0.15%, showcasing the accuracy of swap pricing this month.
These developments indicate that the possibility of rate cuts in September remains on the table. The decision on whether there will be one or two cuts will hinge on the upcoming job and CPI reports, both scheduled before the September 18 meeting.
Key Data Today: Jobless Claims and Retail Sales
The trends we’ve been monitoring continue to progress, signaling a steeper yield curve and the ongoing unwinding of the trade situation. A hotter CPI number would have slowed down this process.
Today’s focus shifts to crucial data on jobless claims and retail sales. Moreover, the USD/JPY trade is currently within a range, offering a breather for the stock market.
However, the significance extends beyond the USD/JPY trade, encompassing the USD/CAD exchange rate’s impact on the S&P 500 as well. The USD/CAD’s 1.385 level has historically served as a bottom for the S&P 500.
USD/CAD – S&P 500 Correlation Analysis
Currently, the USD/CAD has once again played this role. Yet, the USD/CAD has not retraced significantly, maintaining an upward trend, making it challenging to draw definitive conclusions at this point.
If you’re seeking potential turning points in the market, this resistance area could be significant. It marks the 61.8% retracement level and fills the gap from August 1, possibly acting as a resistance zone.
While it’s uncertain whether the market will reverse, this could be a region to watch closely for potential market movements. As of now, it appears to be a technical bounce from oversold conditions.
Stay tuned to see how today unfolds for the market.